BofA Merrill Lynch has given a boost to shares in Boohoo Group PLC (LON:BOO), initiating coverage of the online fashion retailer with a ‘buy’ rating and 280p price target.
In late morning trading, the AIM-listed firm’s stock was 2.1% higher at 222p.
READ: Boohoo raises revenue guidance after a storming first half
In a note to clients, the US bank’s analysts said: “boohoo offers exposure to three important structural trends in apparel: (1) shift to online; (2) consumer demand for value; and (3) a move from fast to faster fashion, owing notably to the strong sourcing background of its founders.”
They noted that Boohoo’s group revenue has grown four-fold in the past four years to £580mln for full-year 2018, and they expect the group’s revenue to triple again in the next five years, making it the fastest-growing company in their coverage.
The analysts pointed out that boohoo shares trade on 27 times 2019 estimated EV/EBIT, a c.20% discount to online peers, which they think “is unjustified considering its superior business model and growth profile”.
In the medium term, they said they see scope for boohoo to become an acquirer of small online brands, which would present incremental upside to their earnings and valuation.